Democratic presidential candidate Joe Biden and his running mate, Sen. Kamala Harris (D-CA), pose a significant threat to Medicare, which provides health care coverage for roughly 60 million American seniors. Biden wants to extend Medicare coverage to people aged 60 to 64, diluting its effectiveness for seniors. Harris has supported doing away with Medicare entirely, under the rubric of a single-payer, socialized health care system.
Medicare already faces obstacles that aren’t political. According to the Centers for Medicare & Medicaid Services (CMS), the Medicare Trust Fund will deplete in 2026, putting American seniors in a precarious position in the years ahead.
The best way to shore up Medicare solvency and reduce runaway health care costs for seniors is by implementing health care price transparency. By requiring health care providers and insurers to reveal their real prices, seniors and all Americans can easily identify less expensive health care options, bringing costs down systemwide.
This summer, Sen Mike Braun (R-IN) introduced the Healthcare Price Transparency Act, which requires all providers and insurers, including those who serve the Medicare population, to publish their discounted cash prices and secret negotiated rates. This legislation will allow health care consumers to shop for less expensive care and coverage, creating a competitive market that will reverse accelerating cost trends. Congress should pass it as part of the COVID-19 stimulus package that it’s currently negotiating.
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While Medicare patients are more insulated from runaway health care prices than other Americans, they still face a significant and growing cost burden. According to the most recent data from the Kaiser Family Foundation, the average Medicare beneficiary pays around $5,500 per year (not including the decades of payroll tax contributions they made to the program). Medicare recipients without supplemental private coverage pay around $7,500. These costs are significant burdens for retirees on fixed incomes. On average, seniors pay 12% of their income on health care.
Medicare coverage does not have annual out-of-pocket maximum protections like health plans in the private market. Empowering beneficiaries with price certainty can protect them from incurring ruinous co-insurance costs under the status quo where prices generally aren’t known until after bills arrive in the mail weeks and months later. Waiting for an unknown medical bill is anxiety-inducing for everyone but especially for seniors on fixed incomes.
According to a recent poll conducted by McLaughlin & Associates, one-third of seniors are afraid of being blindsided by health care costs that are unknown in advance. Eighty percent of them support health care price transparency, and nearly two-thirds said they’d more likely vote for candidates who support this issue.
Lower health care costs from price transparency can also increase the solvency of the Medicare Trust Fund. Currently, Medicare payments to providers are determined by CMS, which sets a base rate for each health care service then applies a multiplier based on circumstances such as clinical severity and geographic location. It’s complicated.
While these payouts are significantly less than the reimbursement rates paid by private insurers, they can still be higher than the market rate. For instance, some procedures and services offered by existing price transparent providers are less expensive than the Medicare rate. Similarly, medical supplies such as wheelchairs, crutches, braces and other paraphernalia can sometimes be purchased less expensively on Amazon than through Medicare.
If Medicare reimbursed providers off the lower market rate, it could improve its fiscal outlook. Currently, annual Medicare spending is more than $750 billion, accounting for about 21% of total national health expenditures. Medicare spending is expected to grow at 7.6% per year over the next decade — the fastest pace among the major health care players. Price transparency can control this rapid inflation.
Congress is currently bogged down in a stalemate over the next COVID-19 stimulus package. Republicans have rightly balked at the fiscal implications involved with trillions of dollars of new federal spending. By lowering national health care costs that are a drain on pocketbooks, health care price transparency can stimulate the economy at no cost to taxpayers and break this congressional stalemate if included. And — short of attacks by congressional Democrats — it can ensure Medicare solvency and effectiveness for generations to come.
Andrew Mangione, who lives in Louisville, is the senior vice president of the Association of Mature American Citizens (AMAC) Action.